Glencore chrome venture gives provisional nod to lower-cost power deal

Glencore Plc’s ferrochrome operation in South Africa initially accepted an offer for cheaper electricity as the company and the state negotiate the restart of the firm’s smelters.

The company’s joint venture with Merafe Resources, which processes chrome ore into ferrochrome, has been discussing a deal with state-owned Eskom for power supply at a tariff of 62 cents ($0.03) per kilowatt hour. That offer was provisionally accepted with “revised terms and conditions” communicated by Eskom’s board, the venture said in an emailed statement on Friday.

While the development is “significant and positive,” final acceptance remains subject to approval by South Africa’s other main ferrochrome firm, Samancor Chrome, and the country’s energy regulator, according to the statement.

Read: Glencore-Merafe chrome smelter deal with Eskom hits a snag

South Africa is the world’s biggest producer of the key ingredient in stainless steel, but its processing industry has been hammered by rocketing electricity prices and fierce competition from China, the top ferrochrome maker. Four of the Glencore-led venture’s five smelting complexes aren’t currently operational.

Eskom said in a separate statement that the arrangement provides a “medium-term solution of up to five years,” allowing the utility to “tailor pricing and contractual structures to the specific commercial circumstances of each smelter.”

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Glencore-Merafe called on the National Electricity Regulator of South Africa to treat the matter as “urgent” and complete outstanding approvals within 30 days. The company also said it was extending a deadline to implement potential job cuts to May 11.

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